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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. MUx / Px = MUy/Py or MUx/MUy = Px/Py






2. The change in quantity demanded resulting from a change in the price of one good relative to other goods






3. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






4. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






5. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






6. Ed = (%dQd)/(%dP). Ignore negative sign






7. AFC = TFC/Q






8. A firm that has market power in the factor market (a wage-setter)






9. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






10. The difference between total revenue and total explicit costs






11. The additional cost incurred from the consumption of the next unit of a good or a service






12. Ed = 1






13. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






14. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






15. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






16. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






17. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






18. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






19. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






20. The total quantity - or total output of a good produced at each quantity of labor employed






21. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






22. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






23. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






24. Ed = 0 - no response to price change






25. AVC = TVC/Q






26. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






27. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






28. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






29. TR = P * Qd






30. Two goods are consumer substitutes if they provide essentially the same utility to consumers






31. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






32. The difference between total revenue and total explicit and implicit costs






33. A good for which higher income decreases demand






34. The ability to set the price above the perfectly competitive level






35. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






36. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






37. The rational decision maker chooses an action if MB = MC






38. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






39. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






40. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






41. Exists if a producer can produce a good at lower opportunity cost than all other producers






42. All firms maximize profit by producing where MR = MC






43. Es = (%dQs) / (%dPrice)






44. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






45. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






46. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






47. Occurs when LRAC is constant over a variety of plant sizes






48. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






49. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






50. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic







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